Move Here To Get A Guaranteed Income

Guaranteed IncomeHow nice would it be to get a guaranteed minimum income each month? I’m not talking about a retirement pension or annuity either. You’ll get this money as long as you’re an adult of legal age. It doesn’t matter what job you do. You could be a librarian, janitor, or fast food worker. Whatever career you have, you’re ensured of receiving a set minimum income. Does that sound appealing?

If you are a resident of Switzerland, then you’re in luck. Apparently there is a major push by a significant enough portion of the population to trigger a referendum. I’m not knowledgeable on the Swiss governmental structure, but this referendum will be put up for a vote and, if it passes as currently proposed, then each Swiss citizen will get a minimum of $2,800 each and every month – no matter what! In fact, you may not even have to be employed to receive this money (that level of detail on the referendum does not seem to be available).

The  impetus for this proposal stems from trying to curb growing pay inequality. Once again, I’m not acquainted with the political landscape in Switzerland, but there appears to be a backlash against top earners similar to the sentiment that has been seen here in the US recently (rhetoric against the “1%”, increased taxes on higher earners, etc.)

Wait, there’s even more! Switzerland also has another referendum called the “1:12 initiative” which “would limit executive pay to the same amount paid to a company’s lowest paid staff member.” I’m taking that to mean if an administrative assistant made $35,000 per year, then that’s all the CEO could earn too. That’s simply astounding.

Pay Equality is a Flawed Concept

Ok, before I share my thoughts on Switzerland’s aggressive income equality movement, I need to make a disclaimer: I am not taking a political stance. While you may ascertain my words as aligning to a certain political party, you would only be making your own assumption on the matter. I am not endorsing any political party. Rather, my evaluations and opinions here are made on economic principles.

Alright, with that out of the way, what is Switzerland thinking?!

Look, I understand the resentment toward people who make beaucoup bucks. Corporate executives, professional sports athletes, politicians, etc. seem to be vastly overpaid and, in most cases, probably are. But mandating CEO pay to match the lowest paid company employee and guaranteeing a perpetual minimum income for life goes way too far. Why? Because it totally destroys any incentive to work hard and improve your lot in life.

One can debate the merits of social welfare and the resultant benefits or detriments it has on society and the economy. For example, I happen to think the ideology behind unemployment benefits is quite sound. While in a perfect world everyone would be responsible and have enough emergency savings to cope with unexpected job loss, reality dictates that’s not always the case. So, having a temporary safety net in place to help manage such a crisis is beneficial (notice the emphasis on “temporary”).

What Switzerland is doing defies sanity though. Face it, lots of people are more brilliant and/or more talented than you are. If they’ve worked hard and smart, they should get paid more! Right? Conversely, there’s a multitude of folks who weren’t blessed with your abilities or cognitive prowess. Should those guys automatically get as much as you? Should they even be guaranteed a minimum income if they’ve done nothing in their life to really earn it?

My belief is that what Switzerland is doing is dangerous and not sustainable in the long term. Now, I’m not predicting imminent doom and gloom for the country. Disincentivizing those at the top and middle while incentivizing those at the bottom (for doing nothing) doesn’t add up though. In a roundabout way, it seems like a reverse or upside down pyramid scheme. Continuing down such an income re-distribution path will eventually mean people won’t ambitiously drive new innovation. Either that, or those people will relocate elsewhere to do it. In the end, the “pyramid” will come crashing down.

Income inequality exists because it rightly should. It’s essentially the supply and demand of the labor market. I’m also not against helping those out who are in need or down on their luck. I just can’t agree with permanently giving free support to those who do little to nothing while putting the hammer down on those who strive to achieve great endeavors.

Then again, maybe I’m an idealistic fool. I’ve been experiencing bouts of  job burnout recently. I’ve been laid off before and could very well be again seeing as how corporate America offers anything but job stability these days. Even vacations aren’t worth it anymore. Perhaps I should just give up and move to Switzerland. The natural landscape is brilliantly beautiful and the culture is rich and interesting. I could land a simple, low stress job (Ricola hornblower perhaps?) and be guaranteed my $33,600/year. Shoot, in doing so I may be making as much as the company’s CEO!!

Should society enact laws to ensure income equality? Or should income be based a “free market” approach where you get paid what you are “worth”? Do we owe it to society to make sure everyone is provided for at a basic, minimum level? Does that abolish incentive to work hard?

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Image courtesy of Francisco Antunes at Flickr.

31 Responses to Move Here To Get A Guaranteed Income

  1. Kathy October 8, 2013 at 5:54 am #

    Finally, someone who sees this the way I do. In the U.S. we already have a safety net for those who lose their jobs through no fault of their own, however, too many people are living on unemployment for years. They can’t find ANY job in nearly 3 years? A guaranteed income won’t help certain people who choose to spend their money on drugs, cigarettes, tattoos etc. At the end of the day they still will be worse off than those who make better life choices. This is just another attempt to make every person 1) exactly the same with regard to outcome and 2) more people dependent on the government so the government can then dictate life choices to them. It is happening in the U.S. already but we just don’t call it what the Swiss are. Someday, they will have taken all the money from the rich and there won’t be any left. Then where will the money come from?

    • Mr. Utopia October 9, 2013 at 8:07 pm #

      It’s quite the dilemma, isn’t it? Where do we as a country or society draw the line between socialistic support and personal autonomy? I think most would agree that some element of social support is a good thing (like temporary unemployment benefits as I used as an example in the article). It helps to maintain a certain baseline level of standard-of-living. If there weren’t some of these programs in place, it’d probably be very detrimental to the country. But, alas, it seems the pendulum has and might be continuing to swing too far in one direction. I do become concerned that innovation and personal ambition might become more stifled if things progress down this path.

  2. Little House October 8, 2013 at 7:06 am #

    A very dangerous tactic, indeed. I’m not familiar with the Swiss government, but are they trying to damage people’s work ethic? Why work if you’re going to make money no matter what? Worst possible scenario they create an incredibly lazy populace.
    Little House recently posted…PAY LESS for your Sprint Cell Phone ServiceMy Profile

    • Mr. Utopia October 9, 2013 at 8:10 pm #

      Those are the same reasons why I’m scratching my head too.Sure, these measures might help to level things off and make everyone more “equal.” But sooner or later it’s going to come full circle as those at the bottom have not motivation to move up in life and those at the top realize all the hard work isn’t worth it.

  3. MonicaOnMoney October 8, 2013 at 1:02 pm #

    I think if people are guarantee a certain amount of money each month, in general, they would not reach thier highest salary potential on their own because they have no reason to strive further.
    MonicaOnMoney recently posted…Feeling Stressed? 22 Halloween Deals for Only $1My Profile

    • Mr. Utopia October 9, 2013 at 8:12 pm #

      I agree. How does that quote go? “Give a man a fish and he eats for a day, teach a man to fish and he eats for a lifetime” It’s something like that and I think it’s applicable here. If you just give everyone a “free” (put in quotes here since someone is paying for it) income then most will likely just be satisfied with it and become complacent.

  4. Lisa E. @ Lisa Vs. The Loans October 8, 2013 at 3:12 pm #

    This is crazy! Their economy would show no improvement in terms of innovation because no one would be motivated to do anything new.
    Lisa E. @ Lisa Vs. The Loans recently posted…Links Lisa Likes – 10/7/13My Profile

    • Mr. Utopia October 9, 2013 at 8:13 pm #

      I think if they end up enacting these referendums, then Switzerland will start to see such an impact although it might take quite some time to manifest.

  5. Edward Antrobus October 9, 2013 at 4:39 am #

    Actually the 1:12 initiative would limit CEO pay to TWELVE TIMES the salary of the lowest paid worker. So if the lowest paid worker gets $35,000, as in your example, the CEO would be limited to $420,000. That doesn’t sound so bad to me. It certainly seems better than Walmart’s CEO making more in an hour than the average store associate does in a year.
    Edward Antrobus recently posted…Frugal Warning: Airborne Chewable TabletsMy Profile

    • Mr. Utopia October 9, 2013 at 8:19 pm #

      That makes a bit more sense, Edward. Thanks for pointing that out. I should have dug into that one a bit more because it didn’t quite sound right. In my defense, I did quote the article I linked to verbatim and it literally stated 1:12 “would limit executive pay to the same amount paid to a company’s lowest paid staff member.”

  6. dojo October 9, 2013 at 6:21 am #

    Let’s say my country went through 50 years of ‘equality’ and it was crappy. We need to strive for better pays, we need to strive to be better and earn more. I am not for any ‘guaranteed’ income, as long as you can work for your money. Most of the issues our countries face is that we are already filled with ‘freeloaders’ who could work, but would rather just wait for the State to take care of them
    dojo recently posted…Saving money: does being frugal have to take off any joy in our lives?My Profile

    • Mr. Utopia October 9, 2013 at 8:26 pm #

      That’s true. Other countries have taken more or less similar approaches (even if it was under the veil of the governmental structure). And, in most cases, it seems to have failed. I think laws like this go against human nature. From day one of our history, those who survived had to work hard against an unforgiving nature. Those that sat around and relied on others probably didn’t last too long.

  7. KK @ Student Debt Survivor October 9, 2013 at 8:02 pm #

    I think one of the things I love most about living in the US is that you can work your way up and make a better life for yourself if you’re willing to work hard (I realize this doesn’t happen for everyone-but it does still happen). Like you said, what would motivate people to work hard if they will get a guaranteed salary either way? I’m sure there’s more to this initiative that I don’t really understand, but on the surface it doesn’t sound like a very good idea.
    KK @ Student Debt Survivor recently posted…September Goal Progress & Income UpdatesMy Profile

    • Mr. Utopia October 9, 2013 at 8:36 pm #

      There very well could be more to the story on these referendums. As I admitted to, I’m not an expert on the Swiss political or economical scene. That said, I think the intent of the measures is apparent even if all of the facts are not presented here. And that intent is making income more equal and “fair” across the board. That’s a foolhardy strategy in my opinion. I too admire the US for the chance to live out the “American dream” although, while nowhere near as drastic as what the Swiss are proposing, I do see signs of the US trending in the same direction. That’s alarming.

  8. DC @ Young Adult Money October 9, 2013 at 9:08 pm #

    The obvious reaction to this post: why work? If you can live a relatively comfortable life of leisure by not really doing anything at all, why not just manage your $2,800 income like a tight-fisted miser and live a relaxing life? It’s certainly a flawed concept.

    Free markets do have safety nets: charities. Unfortunately I think people have come to think of government as the primary source of charity, but in reality they have to take everything they have by threat of force. I could go on and on about this, as I was a political blogger in another life, but I definitely agree with you on this one.
    DC @ Young Adult Money recently posted…Why I Rent An Old Car For $500 A MonthMy Profile

  9. Romona@ Monasez October 10, 2013 at 10:27 am #

    It’s definitely think that the 1:12 initiative is ridiculous. These proposed policies seem like they would completely derail the like order of society. Like I do agree with helping those who are unemployed but it seems like giving everyone a certain amount of money each month would just encourage laziness.
    Romona@ Monasez recently posted…My Job and That Little Thing Called Passion, That I don’t haveMy Profile

  10. Daisy Coleman October 10, 2013 at 10:38 am #

    I think that it should be a free market where everybody earns what they deserve, otherwise individuals will lose motivation and they won’t bother going for the high flying jobs as it won’t be worth the extra hours and stress.
    Daisy Coleman recently posted…Overwelcomed with your workload?My Profile

  11. Jen @ Frugal Rules October 11, 2013 at 7:02 am #

    I was reading this with mouth agape and thinking if this is for real because it sounds so good to be true. Switzerland may mean well but what will the kind of program do to people in the long run is what the question should be. Still, I can’t help but say wow, perhaps anyone reading this would wish they are Swiss citizens.
    Jen @ Frugal Rules recently posted…Should Furloughed Government Employees Be Paid During the Shutdown?My Profile

  12. Andrew@LivingRichCheaply October 11, 2013 at 7:47 am #

    Wow that is interesting. I don’t think this plan will work. I’m no expert but I think if you get a guaranteed income…human nature is not to work so hard. While I do think that something needs to be done with pay inequity and the gap between the rich and poor…this is not the way to solve that problem.
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  13. Michael October 13, 2013 at 6:31 pm #

    Hmmm. Why stop at $2800? If you’re going to vote to give yourself money, you should go big or go home. 😉
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  14. thepotatohead October 14, 2013 at 1:05 pm #

    I already see and read about far too many people in the usa taking the easy way out and living off of others while doing nothing to benefit society. I know if I could make $2800 a month and sit at home and play xbox, vs getting up early to go to work and earning roughly the same amount, I certainly would be pretty motivated to max out my call of duty score on xbox.
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  15. Charles@gettingarichlife October 16, 2013 at 12:32 am #

    The ideal society where everyone is guaranteed a living. I think Cuba voted for that 50 years ago. Never worked in history, never will.
    Charles@gettingarichlife recently posted…How I Become A Millionaire…In DebtMy Profile

  16. SuburbanFinance October 18, 2013 at 5:49 am #

    I am not sure that this is something that will go over well. We’ll see I guess. This seems like it would be a huge drain on taxes.
    SuburbanFinance recently posted…Money Is Music To My EarsMy Profile

  17. Krista October 18, 2013 at 6:58 pm #

    I’m not really an advocate of this plan, however I did hear an interesting radio report on this whole concept which has been tested in different communities around the world for the past few decades. Apparently in third world countries implementing a minimum income increased productivity because it eliminated some of the ‘survival’ mode and increased creativity.

    I bet this has a lot to do with it being a contained community and by no means was the income $2800 a month – but it’s interesting. Who knows?
    Krista recently posted…Keep the ChangeMy Profile

  18. Tie the Money Knot October 21, 2013 at 10:07 pm #

    I’m not a huge fan of such tactics. I’d rather see the free market at work, as we have it here. Sure, it’s not guaranteeing equality of income or employment, but that provides incentive for people to do better. Big picture, our way seems better despite imperfections.
    Tie the Money Knot recently posted…Peering Into the FutureMy Profile

  19. Jon@2-copper-coins.com November 24, 2013 at 8:24 pm #

    I’ve been to Switzerland several times and loved it. I’ve also talked to several people from the country and the pay equity approach has really mixed reviews. One of my friends who is now living in the states thinks it is a ridiculous idea. Yet I have another friend still living in Switzerland who thinks it is a model other countries should follow. Me personally I believe that a free market system serves as a good motivator for wage earners.
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  20. krantcents November 25, 2013 at 4:26 pm #

    Switzerland is expensive, but a subsidy is also a tax on everyone. I do not believe in subsidies or taxes for equality.
    krantcents recently posted…Why Are Some People Successful and Others Fail?My Profile

  21. Tom @ FinanceandFlipFlops March 18, 2014 at 6:54 am #

    Not that I completely agree with Switzerland, but first off, it sounds more like the idea of a minimum wage for everyone was a political stunt by an extreme group as seen here: http://www.businessweek.com/articles/2014-01-16/inequality-fight-swiss-will-vote-on-minimum-income. In addition, it seems that the 12:1 ratio on top executives was shot down earlier last year according to that article. On the other end of the spectrum, CEO’s in America make hundreds of times more than its average worker whereas most countries’ ratio at least falls below 100x the average worker’s salary. This gap in the US has been widening quite rapidly since the 1950’s.

    Another thing to recognize is that while $33,000 may seem like a lot and completely livable in say, Iowa, that is far from the case in Switzerland where the nominal GDP per person is $80,000. To give you an idea of just how expensive it is to live in Switzerland, the Big Mac index (http://www.economist.com/content/big-mac-index) has the Swiss Franc overvalued in comparison to the USD by over 50%.

    Finally, the economic makeup of Switzerland is very different from that of the US. With a population of approximately 8 million people and a very high percentage of its expats being very skilled workers (who if they didn’t have a job, would have to leave), laws and politics in a country like that which could be beneficial to them would make no sense when juxtaposed on to the US, and vice versa.

    • Mr. Utopia March 18, 2014 at 6:11 pm #

      Thanks for the update on these referendums. I wrote this article last year while they were still “on the table.” You make some solid points about the cost-of-living disparity and overall economy differences. Even with those differences, though, the principles used to base these proposals seemed very flawed and suspect…at least to me.

      • Tom @ financeandFlipFlops March 18, 2014 at 8:02 pm #

        Agreed – I’m never a fan of something as socialist as a minimum payment no matter what, but I do think every situation is different and requires it’s own review of whether or not certain referendums would work for each country.

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  1. Fall Roundup and Updates | Suburban Finance - October 19, 2013

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